Young consumers don’t always trust the insurance industry, but most do, according to a new study from the Society of Actuaries (SOA) Research Institute, which found that on average, younger consumers rated insurance companies a six out of 10 in terms of trust.
The study analyzed how younger consumers understand, evaluate and purchase insurance plans. The study also investigated younger consumers’ perception of risk and the impact of the COVID-19 pandemic on how they value insurance.
The majority of young consumers see insurance playing a positive role in their lives and some 61% of younger consumers intend to purchase one or more types of insurance within the next 12 months.
Roughly half of those surveyed prefer to purchase insurance online. Additionally, younger consumers are most likely to own automobile and health insurance, and least likely to own critical illness, disability and accident insurance.
Other key findings include:
• 41% of young consumers feel it is important to have insurance.
• 63% surveyed consider themselves risk neutral, while 23% consider themselves more risk averse, and 14% consider themselves risk tolerant.
• Between 60% and 80% of younger consumers are somewhat or very concerned about the financial impact of each of 12 financial and insurable risks, such as car accidents, damage to personal property or damage to residence.
The report also studied the level of risk tolerance of younger consumers, and their willingness to engage in risky behaviors. Those surveyed who are risk averse are more concerned about accidents and health risks.
But there was a disconnect between the perceived likelihood of an event and concern over it. For example, when asked about their concern of the financial impact of insurable risks, 79% of younger consumers reported concern about being in a car accident that results in significant repair or medical costs, but only 35% of respondents cited they are likely to be in a car accident within the next 10 years.
“It’s clear that young consumers’ perception of insurance varies based on their unique level of risk tolerance or aversion, as well as their perception of certain risks,” says Ronora Stryker, ASA, MAAA, senior practice research actuary, SOA Research Institute. “Despite these differences, the general attitude towards insurance companies among younger consumers is positive, with affordability and level of coverage being the most important factors when purchasing insurance.”
The survey also found younger consumers were motivated to purchase insurance they felt was needed, even if the type of insurance is required. For example, 47% of respondents cited necessity as their motivation for home insurance, compared to 27% who cited purchasing because of a mortgage lending requirement.
The survey report, “Perceptions of Younger Generations on Risk and Insurance,” was conducted online and garnered 1,000 responses from young consumers ages 21-42, who reported having an income of at least $25,000. They also could not work in the insurance industry.